Regulatory Roundup

Open for Comment

ACH Deadlines Proposal by the Federal Reserve Board to modify pricing practices and deposit deadlines for the central bank's automated clearing house. Private-sector clearing house operators have complained that the Fed's pricing creates an anti-competitive atmosphere and that it places more restrictive deposit deadlines on non-Fed clearing house customers. Proposed May 23, but not yet published in the Federal Register. Comments due July 25.

FHLB Capital Proposal by the Federal Housing Finance Board designed to make the capital structure of the 12 Home Loan banks more risk-based. The proposal implements provisions of the Gramm-Leach-Bliley Act. Proposed May 22, but not yet published in the Federal Register. Comments due 90 days after publication with a final rule expected by Nov. 12.

State Preemption The Office of the Comptroller of the Currency has been asked to determine whether Gramm-Leach-Bliley preempts certain provisions of West Virginia's Insurance Sales Consumer Protection Act. Published June 2. Comments due July 3.

Call Reports Proposal by the three federal banking agencies to modify the quarterly call reports, including new data on subprime lending and asset securitization. The changes would take effect with the first quarter next year. Published May 31. Comments due July 31.

Consumer Advisers Nominations are being accepted for memberhips on the Federal Reserve Board's Consumer Advisory Council, whose membership represents the interests of consumers, communities, and the financial services industry. Published May 31. Nominations due Aug. 1.

Credit Cards Proposal by the Fed to amend Regulation Z, which implements the Truth in Lending Act. The proposal would set strict rules for the disclosure of interest rates and other information in credit card solicitations and applications. It would mandate where the information must appear and the type size in which it must be printed. Published May 24. Comments due July 18.

CRA Sunshine Proposal by federal regulators requiring banks and community groups to disclose the terms of some Community Reinvestment Act-related agreements. Banks would have to file annual reports on these agreements, and community groups would have to report annually on how they spent grants and loans from banks. Required by the Gramm-Leach-Bliley Act of 1999. Available on Federal Reserve Board Web site. Published May 19. Comments due July 21.

Home Loan Banks A proposal by the Finance Board to define the Home Loan banks' "core mission activities" as investments in an asset of a member bank or thrift. The plan does not restrict Home Loan banks from buying non-mission assets, like mortgage-backed securities. The proposal also would lift a $9 billion cap on risk-sharing investments in mortgages originated by member institutions. Published May 3. Comment period extended to June 15.

Predatory Lending Notice of proposed rulemaking by the Office of Thrift Supervision regarding predatory lending. State-regulated nonbank mortgage lenders may choose to be regulated under rules issued by the state or rules issued by the OTS. In states with strong laws against predatory lending, some nonbank lenders are opting for the more lenient OTS rules. The agency is considering making its regulations tougher. Published April 5. Comments due July 5.

Recent Actions

FHLB Debt The Finance Board on June 5 adopted a final rule shifting responsibility for issuing Home Loan bank debt to the individual banks from the agency's Office of Finance.

Actions Expected Soon

Market Discipline A report is expected this fall from a private-sector working group on best practices for the public disclosure of information about risks being taken by banks and securities firms. Former Chase Manhattan Corp. chairman Walter Shipley is heading the group, which federal bank and securities regulators formed April 27. Recommendations may be incorporated into examiner guidelines.

FDIC Reform The Federal Deposit Insurance Corp. is considering reforming deposit insurance by doubling coverage to $200,000 and making the risk-based premium system more forward-looking. Bank executives will weigh in on the issue over the course of three meetings scheduled for late May and early June. The agency expects to issue policy options in mid-July and final recommendations by yearend.

Subprime Residuals Bank and thrift regulators are considering a proposal that would prohibit banks from counting subprime-based residuals as capital, unless the bank can show there is a market for them. A residual, also known as a "retained interest," is the interest a bank retains when it securitizes and sells an asset.

Disclosure The Securities and Exchange Commission is considering requiring additional, detailed information on reserve accounts. Published Jan. 31; comments were due April 17.

Comments Closed

FHLB Advances Proposal by the Finance Board to expand the types of collateral financial institutions with less than $500 million of assets may pledge for Home Loan bank advances. The proposal, which implements provisions of Gramm-Leach-Bliley, would allow small business loans and agricultural loans to be used as collateral. Published May 8. Comments were due June 7.

Recourse Proposal by federal regulators to change risk-based capital rules covering asset securitizations. Published March 8. Comments were due June 7.

Fair Value Proposal by the Financial Accounting Standards Board to make fair-value accounting mandatory for virtually the entire bank balance sheet. Under this form of accounting, a financial instrument's value is the price it would fetch on the open market. Issued Dec. 14 and published on FASB's Web site at www.fasb.org. Comments were due May 31.

Merchant Banking Joint interim rule by the Fed and the Treasury Department laying out the rules under which financial holding companies may engage in merchant banking activities under Gramm-Leach-Bliley. The rule limits the amount a company may invest in merchant banking activities to $6 billion, and requires that holdings be sold within 10 years of purchase. Published March 28. Comments were due May 22.

Capital Requirements Proposed rule by the Fed that would set the capital charge for merchant banking investments at 50%. Published March 28. Comments were due May 22.

Regulatory Flexibility The National Credit Union Administration is soliciting public comment on whether, and under what circumstances, credit unions with high net worth and consistently strong performance ratings should be exempt from certain regulations not specifically required by statute. Published March 16. Comments were due May 21.

Debt Ratings Interim rule by the Fed and Treasury setting debt requirements for banks that want to own financial subsidiaries. The Gramm-Leach-Bliley Act requires the 50 largest FDIC-insured U.S. banks to issue long-term debt rated in one of the top three categories by a nationally recognized ratings agency. The interim rule applies to the 50 next-largest, and requires them to hold an "issuer credit rating" within the same three categories. It does not require them to actually issue debt. Published March 20; effective March 14. Comments were due May 15.

Permissible Activities Interim rule by the Fed listing the financial activities permissible for financial holding company affiliates under the Gramm-Leach-Bliley Act. Published March 17; effective March 11. Comments were due May 12.

Affiliate Lending Interim rule by the Fed limiting transactions between two units of the same financial holding company. The rule requires that intra-day extensions of credit to a securities firm from an affiliated bank or thrift or U.S. branch or agency of a foreign bank be at market rates. Also, the limitations of sections 23A and 23B of the Federal Reserve Act are applied to certain covered transactions between a U.S. branch or agency of a foreign bank and a U.S. securities affiliate. Published March 17; effective March 11. Comments were due May 12.

New Holding Companies Interim rule by the Fed establishing the method by which bank holding companies and foreign banks operating in this country may convert to financial holding companies under Gramm-Leach-Bliley. Published Jan. 25; effective March 11. Comments were due March 27. Amendments to this rule, making the notice requirement for financial holding company applications identical for foreign and domestic banks, were published March 15. Comments on the amendments were due April 17.